Horwath HTL - APAC Outlook 2012

HOTEL 2012S c e n a r i o s f o r t h e y e a r a h e a d

A special excerpt from the Hotel Yearbook 2012 :

The 2012 outlook for key geographic marketsExclusive situation reports from Horwath HTL

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This excerpt from the Hotel Yearbook 2012 is brought to you by :

Hotel, Tourism and Leisure

TM

Signs of lifeASiA iS inSulAted from europe’S current economic woeS – iSn’t it ? to find out how SeverAl ASiAn

And pAcific mArketS will likely fAre in 2012, we turned to HORWATH HTL, whoSe conSultAntS SprAng

into Action And produced the following SituAtion reportS And outlookS covering twelve countrieS

from the uAe to AuStrAliA, And SeverAl pointS in between.

CHINAsituation rEport

While it is tempting to lump a whole heap of data together and

come up with a « China Outlook », the China reality is the same

for any large country – one story cannot tell the whole tale.

So instead I will break up the China market into what I see as

different market types based on performance – it’s a tale of the

good, the bad and the ugly !

To do this I have recently devised the following groupings of

market types :

1) Tanked ; 2) Emerging ; 3) Stagnant ; 4) Performers ; and 5)

Primary Leaders. These five classifications would cover most major

hotel markets across China. The data presented has been sourced

from the 2011 China Hotel Industry Study (only 5-star have been

included) and from STR Global for year-to-date 2011 data (top-tier

market groupings for performance data) and pipeline data.

yEar-to-datE sEptEmbEr rEvpar pErformancE lEvEls,

str Global data

Please note some markets have insufficient data to be included in the above chart.

r e g i o n A l o u t l o o k : A S i A - p A c i f i c

tanKEd marKEts

Tanked markets are those that have been totally overwhelmed

by new supply additions and do not seem to have the ability to

generate demand to be able to drag themselves out. There is

also a continued heavy pipeline of new additions set to enter

these markets. Suzhou and Tianjin are the representatives of

this category.

Tanked Markets Key Data 2010 Financial Data

Number of Hotels 21

Total Rooms 6,483

Occupancy % 50 %

ADR RMB 673

RevPAR RMB 336

Total Revenue (PAR) RMB 220,406

GOP (PAR) RMB 53,810

GOP (% Total Revenue) 24 %

Hotels In Pipeline 25

Rooms In Pipeline 8,329

Both Suzhou and Tianjin have been hit extremely hard with new

supply additions over the last 3 to 5 years and have suffered

a relatively prolonged period of extremely low occupancy

performance levels. Extremely low occupancies have impacted

rates in the markets and are insufficient to allow for a decent

GOP to be recorded.

Outlook : Given extensive supply pipelines it would appear

that these Tanked markets will not be seeing much relief, with

significant additions still to come, particularly for Tianjin. As

such, these markets might be « tanked » for some time.

EmErGinG marKEts

Emerging markets are those that have yet to see any significant

entry of international 5-star hotels (or have just had new branded

hotels enter) and are just now starting to mature as viable hotel

BEIJING

SANYA

SHANGHAÏ

SHENZHEN

GUANGZHOU

CHENGDU

QINGDAO

XIAN

SHENYANG

WUHAN

CHONGQING

HANGZHOU

NANJING

NINGBO

FUZHOU

ZHENGZHOU

FOSHAN

HEFEI

WUXI

TIANJIN

SUZHOU

RMB

Primary

Performing

Stagnant Emerging

Tanked

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markets for the international brands. Cities in this category include

Changsha, Wuxi, Hefei, Fuzhou, Foshan, Guiyang, Zhengzhou,

Jinan, Taiyuan and Ningbo. All except Taiyuan have a leading

international 5-star hotel present in the market, but competition

generally remains limited – although in Ningbo, competition has

already heated up, and from YTD data it would seem that Wuxi

may not be able to realize it’s potential anytime soon.

Emerging Markets Key Data

Number of Hotels 34

Total Rooms 11,969

Occupancy % 60 %

ADR RMB 619

RevPAR RMB 371






We can see that performance levels in these emerging markets are

a step above the stagnant markets, with higher ADR levels driving

improved GOP. Occupancy does remain weak, however, at only

60 % in 2010 and typically it is the leading one or two hotels in the

market that are driving performance and profitability, as they tend

to be able to record a significant premium over the competition.

Emerging markets are labeled as such because they typically

lack any real depth in room night demand. These markets are at

strong risk of being unable to cope with large amounts of new

supply (demonstrated by Wuxi).

Outlook : Each of the emerging markets has a moderate

amount of new supply set to enter, but not so significant that it

could cause a major problem. Ningbo, already struggling with

recent supply additions, is likely to be impacted the most, and

may move into the Tanked category in the next couple of years.

And it would seem Wuxi has already become overwhelmed.

Guiyang, Taiyuan and Zhengzhou could be tested the most in

regard to the depth of top-tier demand. However, as long as

additions are spread over the next three to four years, these

markets should be able to absorb the supply.

staGnant marKEts

Stagnant markets are those that have failed to improve upon

performance levels for the last 5 to 10 years. This has often

been the result of continued new supply additions to the

market, and while demand growth has been strong, it has been

insufficient to allow for improvements in occupancy or growth

in average rates. Markets that I would consider to be stagnant

include Wuhan, Shenyang, Chongqing, and Xi’An – although

Xi’An has certainly shown greater growth potential in the last

few years and could soon be considered a « Performer. »

Stagnant Markets Key Data

Number of Hotels 28

Total Rooms 9,985

Occupancy % 62 %

ADR RMB 528

RevPAR RMB 325






The markets listed above have not been overwhelmed by supply

over the last 5 years, although all have had some new additions

with Chongqing suffering the most in that regard. However,

other than Chongqing, where demand growth has been strong,

the other markets listed have struggled to record any real

improvements in either occupancy or average room rates and KE

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Signs of lifer e g i o n A l o u t l o o k : A S i A - p A c i f i c

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the quality of properties in the market have generally aged. The

result has been a low average rate below RMB 600.

Outlook : Chongqing will continue to be hit hardest with new

additions, and while demand growth should continue to be

relatively strong, the scale of the new supply is likely to continue

to suppress market performance levels in the years to come.

Shenyang and Wuhan may struggle to support the new supply

additions set to enter the market, while Xi’An may have more

potential to improve performance. On the whole, though, most

of these markets may not make much improvement.

pErforminG marKEts

Performing markets are those that have an established base of

quality hotels and have largely been able to support the growth

in supply with strong growth in demand and at the same time

grow room rates. Cities in this category include Guangzhou,

Shenzhen, Hangzhou, Qingdao, Chengdu and Nanjing.

Performing Markets Key Data

Number of Hotels 54

Total Rooms 21,376

Occupancy % 63 %

ADR RMB 824

RevPAR RMB 522






The Performing hotel markets are able to record a considerable

premium in average room rates at above RMB 800, compared

to the previous market types. However, as with most markets,

occupancy remains relatively soft at 63 % due to consistent

increases in room supply.

Outlook : We are set to see some significant additions for the

Performing markets, particularly in Chengdu, Guangzhou and

Hangzhou. While Performing markets are better placed to handle

new supply additions, given the larger base of existing quality supply

present, some of these markets over the next 5 years may slip

into the category of Stagnant markets, with future growth in room

rate levels curtailed by persistent low occupancy performance.

The markets with smaller existing supply bases such as Chengdu,

Hangzhou, Qingdao and Nanjing are at most risk of this.

primary lEadinG marKEts

The analysis for Primary Leading markets has been restricted to

Shanghai, Beijing and Sanya, and has only included hotels that

recorded an average room rate higher than RMB 1,000 in 2010.

Shanghai and Beijing are clearly the two leading hotel markets

in China, with considerably more scale in existing hotel supply,

significant rate depth, and the presence of the best hotels in

China. The Sanya market has been a phenomenal growth story

over the last 5 years and has thrived on the continued significant

additions of quality international-standard 5-star hotels.

Impressive room rates and GOP levels have been achieved in

Sanya, which warrants its inclusion in this market category.

Primary Leading Markets

Number of Hotels 49

Total Rooms 19,815

Occupancy % 63 %

ADR RMB 1,427

RevPAR RMB 893






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The Primary Leading markets perform significantly above

Performing markets in regard to average room rates, recording a

premium of 73 %. Significant revenue is generated by the Primary

Leading hotels, not just due to the premium ADR level, but also

through a significant share of food and beverage revenue.

Outlook : While the supply pipeline for the Primary Leading

markets remains strong, these markets are well placed to be

able to absorb the additions. Beijing would seemed best placed

for this, with a relatively small pipeline set to enter the market

in the coming years, while Shanghai will feel more pain with

relatively strong additions to continue. Sanya has the largest

pipeline increase, yet for the last 5 years has demonstrated not

only a strong ability to absorb new supply, but to continually

push room rate growth. This will surely be tested, but there

are yet to appear any indications that this will not be the case

moving forward.

Damien Little

AUSTRALIAsituation rEport

Despite suffering major floods and cyclones in part of the

country and a softening in consumer confidence and spending

levels, the Australian hotel industry has continued to progress

well in 2011. Driven by 20 consecutive years of GDP growth

and a burgeoning mining sector, the outlook for room demand

remains strong. Having been one of the few countries to avoid

negative GDP growth during the GFC, Australia’s real GDP is

expected to continue to grow by about 2.5 % in 2011 and by

4 % in 2012. Unemployment remains below 5 % and is falling,

while corporate profits have held up. Both of these factors have

supported hotel demand.

Beyond the corporate sector, the situation remains less positive.

International visitor arrivals have generally trended downwards

or been flat in recent years (and are expected to remain below

6m in 2011) while in sharp contrast, outbound departures

continue to surge (and now exceed 7m per annum), reflecting

the combined impact of the continuing strength of the Australian

dollar (that is encouraging Australians to holiday overseas) and

the increasing number of low-cost destinations in the region

that can be reached on low-cost carriers. Markets such as Bali

and Thailand continue to benefit, while previously expensive

markets for Australia such as the USA are benefitting from pent-

up demand out of Australia and in response are now actively

pursuing Australia as a target market (thereby exacerbating the

problem for domestic Australian leisure destinations).

On a more positive note, the growth in demand out of China

and elsewhere in Asia has helped mitigate the impact of

falling demand from markets such as Japan, while positive

announcements have recently been made in relation to one of

the most important factors that will influence future inbound

demand, namely the growth in airline capacity for carriers out of

China and out of key hubs such as Dubai.

As an indication of the strength of recent demand, occupancy in

Australia’s city hotel markets has grown from under 70 % to over

80 % during the past decade, while ADR growth has exceeded

3 % per annum. Sydney, Brisbane and Perth are achieving high

80 % occupancy levels while Melbourne and some smaller

markets such as Canberra also continue to record impressive

RevPAR growth rates. KE

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nEw supply pipElinE

The recent strength of hotel performance in Australia is also

partially due to the minimal level of new room supply entering

the market, a situation that looks likely to continue in most key

markets for the foreseeable future. According to Jones Lang La

Salle Hotels, there are currently less than 4,000 rooms under

construction or proposed, representing only a 4 % increase

in room supply in Australia’s major accommodation markets.

However, a sharp increase in recent development approvals and

an increased preparedness by local governments to provide

development incentives suggest that longer term, the demand/

supply imbalance may be alleviated somewhat. Innovative

concepts such as the use of prefabricated modular hotels are

also being introduced in some remote markets where alternative

construction is not otherwise viable.

hotEl invEstmEnt

Australian hotel transaction volumes are exceeding A$1 billion

per annum and demand remains strong, in particular from

cashed-up Asian investors. As a result, values have held up

well despite difficult global economic conditions, and there

have been few distressed sales. However, in several domestic

leisure markets, the situation remains more problematic. Major

transactions in 2010/11 included market leading properties such

as the Novotel on Collins in Melbourne and Hilton Melbourne

Airport, while leisure market transactions included the iconic

Ayers Rock Resort and Sheraton Mirage Port Douglas. Several

opportunistic acquisitions, such as Fairmont Resort, Blue

Mountains were also achieved.

John Smith

JAPANsituation rEport

After the nightmare of the worst ever earthquake on March 11,

the Japanese hotel industry had to face another shaking. The

shaking was not actually a physical one – although in fact we

have had many physical aftershocks – but it was a big shake in

the market environment. According to STR Global, as shown in

the accompanying tables, average RevPAR for major full-service

hotels in Tokyo fell to JPY 8,561 in March 2011, or 38.7 % from

March 2010. It should be noted that we had expected RevPAR of

major hotels in general to increase in most of the major markets

for the whole year 2011. In fact, we had seen clear improvements

in major KPIs, namely occupancy, ADR, and RevPAR in major

markets until February – or more exactly, until March 11, 2011.

Kpis for major full-sErvicE hotEls in toKyo (january-march, 2010 and 2011)

2010 Jan-Feb

2011Jan-Feb

2010Mar

2011Mar

OCC 74 % 74.8 % 81.8 % 51.1 %

ADRJPY

16,639JPY

17,014JPY

17,068JPY

16,754

RevPARJPY

12,306JPY

12,722JPY

13,968JPY 8,561

Source : STR Global

Hotels in the Tokyo area became major victims of the

problem with the Fukushima Nuclear Power Plant (rather

than of the East Japan Earthquake followed by the record-

breaking tsunami). From our past experience of co-called

« Lehman shock, » we believe that the current market turmoil

is completely different from what we experienced during the

previous recessionary period in 2009. At that time, faced with

a depressed market environment after the « Lehman shock, »

hotels in Tokyo lost corporate clientele because of the sudden

and intense economic downturn. Instead, they resorted to

heavy discounting on their room rate to attract leisure FIT, and

many hotels successfully managed to compensate for the lost

corporate sales with the leisure demand. However, what we

observed after the earthquake, especially in March and April

in the Tokyo market, was that all segments including business,

domestic and international leisure, FIT or group, all stagnated,

thus hotels could not sell their inventories even if they offered

heavy discounts. As a result, average occupancy for our sample

full-service hotels in Tokyo was down by as much as 30.7 %, to

51.1 % in March 2011 (March 2010 : 81.8 %).

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In contrast, we observed improved performance for hotels in

northeastern Japan, the area near the epicenter of the quake.

Hoteliers in Sendai and other major cities in northeastern

prefectures say that they have seen strong recovery-related

lodging demands from corporate travelers, volunteers, or even

local governments renting entire hotel properties to provide

shelters for local people in need and to house recovery corps.

outlooK for 2012

Probably the biggest challenge that the Japanese hotel industry

will have to cope with for 2012 should be how they achieve

the full recovery of overseas visitor arrivals, particularly in the

leisure segment. The Japan National Tourism Organization

(JNTO) announced that overseas arrivals to Japan dramatically

decreased in March by 50.3 % compared to 2010, to 352,800.

The decreasing trend in the number of visitor arrivals is

projected to continue until the problem with the nuclear power

plant in Fukushima has been settled.

Meanwhile, we project that domestic demand is coming back

relatively sooner, as we confirmed a positive move in the domestic

leisure FIT segment during the long holiday week from late April

to early May (which is what we call the « golden week »), as well

as during the summer vacation period in July and August. Major

tourist areas in general reported that their visitor arrivals compared

well to the previous year, and hotels in these areas enjoyed the

same or even higher levels of occupancy compared to 2010. We

believe this is a very promising note for the future market recovery.

STR Global also indicated an improving note for major markets

nationwide. For example, as shown in the second table, STR

Global reported that the negative margin had significantly narrowed

in RevPAR, both for YTD to July 2011 and for the month of July

2011 compared to the figures during the same periods in 2010,

which we believe should be a very promising sign for the future.

Kpis for major full-sErvicE hotEls in toKyo (january-july, 2010 and 2011)

2010 Jan-Jul

2011Jan-Jul

2010Jul

2011Jul

OCC 77 % 63 % 79.2 % 71.2 %

ADRJPY

16,973JPY

15,784JPY

16,712JPY

14,940

RevPARJPY

13,069JPY

9,943JPY

13,233JPY

10,640

Source : STR Global

While the exact financial impact from the East Japan

Earthquake is yet to be estimated, bookings for more than

560,000 rooms were cancelled after the earthquake. In our

interviews, we heard from General Managers at Japanese hotels

that a majority of them projected total revenue for their property

to slightly decrease in 2011. However, we believe that the long-

term negative effect of both the earthquake and the nuclear

power plant problem will be minimal to the Japanese industry.

Major international tourist locations like Kyoto had no damage

from the quake, and they have nothing to do with the Fukushima

problem. However, the real issue should be the timing – or when

people recognize that things have been settled and it is safe

enough to travel around Japan. While it all depends on how

long it takes until the Fukushima nuclear power plant problem

is completely settled, we project to see further market recovery

in 2012.

Kobi Takabayashi

INdIAsituation rEport

2011 is turning out to be a sweet-sour year. It began with strong

promise from the viewpoint of operations and development

activity. However, economic challenges and lack of policy

initiatives have impacted hotel development. While operations have

maintained momentum for the most part, development activity has

clearly slowed down as money has become expensive. KE

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In 2011, demand revival has occurred across most markets

leading to a steady improvement in occupancies ; rates have

also improved, particularly in the last quarter. On a city-wise

basis, these must be seen in the context of increased supply

absorption, with about 9,000 new rooms being added in 2011

(about 15 % addition to the supply of branded hotel rooms).

New hotels opened this year include two much celebrated

luxury hotels – The Oberoi, Gurgaon and the Leela Kempinski

Delhi. Supply growth continues across segments and brands.

Brands are gradually spreading beyond the metro cities :

Chandigarh, Coimbatore, Jaipur, Kochi are among the cities

with new first class and higher grade hotels, while budget hotels

are spreading through a wider market. This does help deepen

the supply and support new demand in the primary cities while

also creating greater supply depth in metro markets. New

supply in 2011 will round off with the partial opening of the 600

room ITC Grand Chola in Chennai.

Inbound travel volumes for the period January through

September 2011 have increased by about 10 % over 2010 ;

foreign exchange earnings grew by 16.6 % in the same period,

reflecting higher realizations from visitors. Of course, the per

capita spend has largely remained unchanged, since

the Indian rupee has depreciated by nearly 10 % in recent

months. Domestic travel continues to be a significant volume

driver for hotels : 725 million visits in 2010, with over 800 million

visits expected for 2011. In reality, however, the translated

demand for hotel rooms really comes from less than 2 % of the

domestic visits.

outlooK for 2012

It is difficult to take a realistic view for 2012, as several

uncertainties could shackle the performance and growth of the

industry : the Euro-zone crisis and expected recession, lack of

reform impetus in the Indian economy, slowdown in investment

as funds become scarce and expensive, impact of high inflation

on profitability and discretionary spends, etc. Each of these

would be significant, and the combined implication could be

severe. The Indian economy has previously enjoyed greater

resilience due to the strength of its domestic sector – but this

The leisure sector, particularly upscale leisure, which is significantly dependant upon inbound travel could suffer from the Euro-zone challenges

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side of the business, too, is hurting as inflation and high interest

rates impact demand.

Against this backdrop, the outlook for new growth will clearly be

cautious – not in terms of exploration of longer term opportunities,

the initial planning and site acquisition, but in terms of actual

commitment of development funds. On-going projects at an

advanced stage of completion will go through to completion,

though developers will encounter difficulties in any refinance

structuring that was intended post-commencement of operations.

On the flip-side, the slowdown in capacity addition would be

sweet music to the existing hotels. There will clearly be a less

competitive environment than may have been anticipated in

the medium term. Demand levels are still good and will recover

smartly, once the business environment gains positivity.

Operating hotels will reap benefit from this medium-term

demand/supply imbalance. The leisure sector, particularly

upscale leisure, which is significantly dependant upon inbound

travel could suffer from the Euro-zone challenges ; mid-

market and upper upscale hotels could gain amidst buyer rate

conservatism ; banqueting and F&B may suffer inflation led

pressures in demand and operating costs.

And the best will win.

Vijay Thacker

THAILANdsituation rEport

2011 continues to be a very eventful year for Thailand. After a

relatively peaceful first half of the year, all eyes were on the Land of

Smiles in July as the country held its first general elections since

2007. The populist Pheu Thai Party won the majority of seats, and

Thailand’s first female Prime Minister, Yingluck Shinawatra, sister

of ousted ex-Prime Minister Thaksin Shinawatra, was appointed.

After almost five years of political unrest and economic instability,

the Thais, and the region, were eager to witness reconciliation

amongst the various political stakeholders in the nation.

occupancy pErformancE, thailand hotEls,

2006-2011 (sEpt ytd)

SEPT YTD

BangKOK PhuKET KOh SaMui

occ Adr occ Adr occ Adr

2009 51 % 3,197 54 % 3,887 48 % 8,760

2010 51 % 2,974 63 % 3,926 56 % 7,306

2011 65 % 3,019 71 % 3,948 56 % 8,056

SEPT YTD

PaTTaYa hua hin Chiang Mai

occ Adr occ Adr occ Adr

2009 57 % 2,404 59 % 3,612 29 % 2,919

2010 65 % 2,272 58 % 3,535 37 % 2,535

2011 72 % 2,507 62 % 3,682 51 % 2,495

Occupancy of hotels in the key destinations within Thailand

started to slide since the political crisis in 2006, reaching rock

bottom in 2009 amidst the Global Financial Crisis. As the

country emerged from the worst of the economic and political

conditions, occupancy performance started to recover in 2010,

albeit at a slow pace. As of September YTD 2011, hotels in

most destinations are registering growth in both occupancy

and average daily rate (ADR). The calm political situation in 2011

bode well for the tourism sector. International visitor arrivals to KE

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Phuket

Pattaya

Chiang Mai

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Thailand between January and July reached about 11.2 million,

which was a 26.5 % growth over the same period in 2010. Asian

source markets accounted for about 59 % of total international

arrivals, followed by European markets which accounted for

about 30 %.

In terms of occupancy, popular leisure destinations such as

Phuket, Pattaya and Chiang Mai have resumed to pre-crisis

levels. ADR, however, remains a struggle – only Hua Hin has

recovered from the crisis, while all other key destinations are

achieving market ADRs about 10 to 20 % lower than pre-

crisis levels. In addition, according to the 2011 Thailand Hotel

Industry Annual Survey of Operations published by Horwath

HTL, increasing departmental and undistributed expenses

have exerted additional downward pressure on operating profit,

diminishing GOP margins by about 13 % year-on-year in 2010

(of the sample of respondents).

Nevertheless, 2011 also saw the opening of several delayed

but much anticipated hotels and resorts in Thailand. IHG’s

Crowne Plaza returned to Bangkok through the rebranding of

the previous Pan Pacific Hotel located in Silom. The 176-room

St. Regis Bangkok opened in a prime downtown location in

April, making it the newest luxury property in the city. Conrad

Koh Samui opened in September, as the only west facing resort

on the island. Other high profile hotel projects, such as Siam

Kempinski Bangkok, Four Points by Sheraton Sukhumvit 15 and

W Koh Samui opened in the later half of 2010 and entered their

first year of operations in 2011 as well.

Unfortunately in September 2011, flash floods hit 60 out of

77 provinces in Thailand, swamping factories of international

companies such as Canon Inc, Western Digital and Honda

Motor Co., destroying more than 25 % of the nation’s rice farms

and crippling transportation networks in the country. Overall

damage, according to the Thai Finance Ministry, could exceed

US$6 billion. Travel warnings were issued by 21 countries

including the key geographic sources such as the United States,

Japan and Singapore. Hotels across the country have reported

a significant number of cancellations and drops in room

reservations. As a result, the Thai Central Bank announced, in

late-October, a revised forecast for economic growth in 2011

from 4.1 % to 2.6 %. At the time of writing (November 2011),

there is still no end in sight for the crisis, and the country faces

a variety of threats, including the outbreak of disease.

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outlooK for 2012

How enduring will the smiles be ? After an extended period

of economic and political turmoil, and a series of unfortunate

events, the country and its people are ready to move on and

rebuild the country’s economic prowess and image.

The Tourism Council of Thailand (TCT) anticipates that

economic woes in Europe and the USA will have a negative

impact on tourist arrival statistics in Thailand, as the growth

of European tourists has shown signs of slowing down in Q4

2011. TCT expects that arrival numbers for 2012 will likely be

static as the US dollar and the Euro grow weaker against Asian

currencies. As a result, Russian and Asian markets will rise in

importance in the Thai tourism industry. The Thai government is

still hopeful that, despite the ups and downs in the last decade,

international tourist arrivals will reach its target of 27 million,

generating tourism revenue of about THB 1.1 trillion by 2015.

2012 will be a crucial year for Thailand. The willingness of the

various political parties to put the past behind them and the

ability of the new parliament to reinvigorate the economy will

have a large impact on the progress of the country. Growth

in corporate demand for Bangkok will be largely impacted by

stability in government policies and the health of the general

economy. At the same time, hotels in Bangkok are expected to

continue struggling with oversupply, particularly in the upscale

segment, which will inevitably make it challenging to increase

ADR in the short to medium term. Leisure demand for the beach

destinations, however, has been better insulated against these

external factors. Destinations such as Phuket and Pattaya are

expected to continue to excel in both occupancy and ADR.

Some exciting new openings expected in Bangkok in 2012 are

the W Bangkok, Regent Bangkok Hotel & Residences, Hotel

Okura Bangkok (Okura’s first foray into Thailand), Hilton and

Doubletree by Hilton, Sofitel So Bangkok (Accor’s new brand

and the second Sofitel So in the world, after Mauritius), and

Hotel Indigo Bangkok Wireless Road. New resorts to look out

for in 2012 are Radisson Resort Hua Hin and Similan Beach –

A Ritz Carlton Reserve.

True to its tourism campaign slogan of « Amazing Thailand, »

Thailand has proven to be a very resilient leisure and business

destination in the region, having weathered the devastating

tsunami in 2004, the last 5 years of political gridlock, street

protests, airport closures, the Global Financial Crisis and the

recent floods. International tourists continue to flock to the

country, drawn by its warm hospitality, distinct cuisine, world-

class hotels and resorts, and white, sandy beaches. We are

optimistic that Thailand will ultimately pull through and regain its

foothold as one of the prime tourism destinations in the region.

Shyn Yee Ho

SINGAPOREsituation rEport

Following on the extremely well timed opening of two multi-

billion dollar integrated resort (IR) complexes (Marina Bay

Sands and Resorts World Sentosa) in the first half of 2010,

visitor arrivals to Singapore have been scaling new heights.

As of YTD August 2011, arrivals were up 15.5 % year-on-year,

putting arrivals for the year on track to reaching 13 million (vs.

11.6 million in 2010). The induced visitor growth comes primarily

from regional source markets such as China (+39 %), Hong

Kong (+27 %), Japan (+21 %), ASEAN (+17 %), Korea (+14 %) and

Australia/NZ (+12 %).

In addition to the attraction of the two casinos (16,000 m2 each),

the IRs are generating incremental arrivals from their substantial

convention and exhibition spaces, retail malls, concert/show

theaters and a Universal Studios theme park. At the same

time, a variety of new age retail complexes springing up along

Orchard Road, and the upgrading of existing centers, has

served to augment Singapore’s image as a shopper’s paradise.

Business visitors have also been on the rise as the strategy to

position Singapore as the regional MNC and financial services

hub, as well as an international center for bioscience research,

has been proving to be successful.


HOTELyearbook2012

Signs of life


sinGaporE tourism arrivals, 1999-2011f

Source : Singapore Tourism Board

Not surprisingly, the growth in visitor arrivals has also translated into

a booming hotel market. Despite the addition of some 7,000 rooms

since the beginning of 2010, market occupancy has remained high,

hovering at 86 % as of YTD September 2011. Given the strong

visitor arrivals, it’s not surprising that hotel room-nights are up

17 % year-on-year, which compares to 14 % growth in room-nights

available. Such sustained high occupancy has supported ADR

increases across the market, averaging just over 13 % growth year-

on-year. RevPAR in turn has grown a stunning 15 % year-on-year.

rna, rnd and occupancy, 2005 to 2011f


marKEt rEvpar, 2005 to 2011 (ytd sEpt)


RevPAR growth has been experienced across all hotel product

categories. However, based on 2010 results, the Economy

segment has been experiencing extraordinary RevPAR Growth

(+39 % in 2010). As a result, a flurry of new branded Economy

hotels are now under development, while the two operating

Ibis hotels in town were acquired by a local investor at amounts

significantly above their investment costs (one was acquired

only three months after its opening).

1999

mill

ions

2001 2003 2005 2007 2009 2011

Visitors Arrivals Growth (%)

0

3

6

9

12

15

-20

-30

-10

0

10

20

30

40

2005 2007 2008 20102006 2009 2011

Room night available Room night demand Occupancy

5

6

7

8

9

10

11

12

14

13

70

72

74

76

78

80

82

84

86

88

mill

ions

2005 2006 2007 2008 2009 2010 2011YTD

Occupancy

Occ

upan

cy (%

)

AD

R /

Rev

PAR

(SG

D)

ADR RevPAR

0

80

90

7075100

200

30085

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rEvpar by hotEl tiEr, 2005 to 2010


outlooK for 2012

As Singapore’s open economy is particularly vulnerable to

external shocks such as a potential economic meltdown in

Europe, a double-dip recession in the US, and a slowdown

in growth in China, a cautious outlook for 2012 is warranted.

However, with current market conditions so strong and no

tangible signs of downturn yet evident, it’s hard not to be bullish

about the prospects for 2012.

For starters, supply growth is estimated at « only » 7.5 %. If the

demand growth pace fell by half, market occupancy would

remain at 85-86 %, while at no growth, occupancy would still

be at 80 %, a rather healthy level relative to any international

comparison. Should demand growth exceed 7.5 % – which is

quite possible – the market will actually be under quite a bit

of stress with regard to availability of both rooms and staff to

provide proper service levels, though revenue managers (and

hotel owners) will be quite pleased by the favorable conditions

for further strong ADR/RevPAR growth.

Additional considerations supportive of a positive outlook,

include the following :

• 2012 will be the second full year of operations for the Marina

Bay Sands convention and exhibition center and thus will see it

hosting an increasing number of large-scale international events.

• The opening of several significant new attractions at Resorts World

Sentosa, including the Maritime Xperiential Museum, Equarius

Water Park and Transformers : The Ride at Universal Studios

• The opening of a new US$ 500 million international cruise terminal

• Expansion in medical tourism via new facilities and added

regional promotional activity

• Continued growth in Singapore’s status as the regional

hub for MNC operations, financial services, research and

development, etc.

• New low-cost carriers entering the market (e.g. Scoot by

Singapore Airlines) and the expansion in routes and schedules

further improving and widening Singapore’s access points

• Continued hosting of the Singapore F1 night race

• In addition to an overall increase in the number of arrivals, the

added attractions to Singapore’s tourism offer have helped increase

average length of stay to 3.9 nights in 2010 (vs. 3.4 in 2005)

All in all, Singapore is considered one of Asia’s hottest

destinations, which has translated into incredibly strong hotel

market performance conditions and made it probably the most

sought-after market for hotel developers and investors.

Robert Hecker

MALAYSIAsituation rEport

In 2010, Malaysia recorded a modest 3.9 % increase in foreign

arrivals, the lowest increase since 2004, to 24.6 million. Despite

the recovery from the slight economy downturn of 2009, hotel

occupancy levels across the country declined slightly to 59 % from

RevpAR growth has been experienced across all hotel product categories

2006 2007 2008 2009 2010

Mid-tier EconomyUpscaleLuxury

50

100

150

200

250

300

350

+31%

+25%

+22%

+16%

+39%

+31%

+27%

+22%

-31%

-30%

-26%

-27%

+1%

+9%

+9%

+8%

+/-% : Y-o-Y Growth


HOTELyearbook2012

Signs of life


HOTELyearbook2012

61 % in 2009. While most states and territories registered declines,

hotels in Kuala Lumpur and Selangor chalked up increases in

occupancy levels of 4.2 and 2.4 % points, respectively.

The Malaysian economy improved significantly in 2010 with

GDP growth of 7.2 % from -1.7 % in 2009. For the first quarter

of 2011, the economy grew at 4.9 %, well within market

expectation of between 4.7 % and 5 %. It slowed in the second

quarter to 4 % due to weaker exports to developed countries.

According to Bank Negara, Malaysia’s Central Bank, the debt

crisis in the Euro zone and the slowing growth in the USA pose

risks to Malaysia’s economy because of the volatility those

developments can cause in financial markets. But the Central

Bank maintains optimism in achieving a 5 % GDP growth in

2011 due to intact economic fundamentals.

Foreign arrivals for the first half of 2011 fell 4.2 % compared to

the corresponding period last year to 11.4 million (2010 : 11.9

million). Although the Government has targeted tourist arrivals

at 25 million for 2011, a target increase of 1.7 %, it looked as

if the target may not be achieved due to an expected drop in

tourists from Japan owing to the tsunami and nuclear energy

crisis. However, the floods currently inundating Bangkok, which

began in October 2011 and are expected to continue through

December 2011, may divert some tourist traffic to Malaysia.

Hence, we are confident the tourist arrivals target set by the

Government may be achieved.

The average occupancy levels of the hotel market in Kuala

Lumpur for the first 8 months of 2011 improved by 1.0

percentage point to 71 % compared to the corresponding year

in 2010. It is expected the whole year’s average occupancy for

2011 will register between 71 and 73 %. Similarly for the ADR

over the first 8 months, the market registered a 1 % increase

compared to the corresponding period in 2010 and it is

estimated the market will achieve a small increase of between

1 and 2 % for 2011 ; i.e. ADR of between RM 265 and RM 270

(US$ 88 and US$ 92).

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outlooK for 2012

For 2012, the country’s hotel market may see a slight decline in

performance due to projected slowdown in tourist arrivals. The

decision by Malaysia Airlines, the national carrier, to rescind

flight services to South Africa and Argentina, as well as reducing

flight frequencies between Kota Kinabalu, one of Malaysia’s top

holiday destinations, and Tokyo, Osaka and Seoul, does not

bode well for the tourism industry.

Kuala Lumpur is expected to remain the top destinations for

both corporate and leisure. 2012 will see the opening of the 455-

room Grand Hyatt Kuala Lumpur, adding another major brand

player in the high-end hotel market that will soon be joined by

St Regis (2013-14) and W (2014). The increasing number of

top brands is expected to boost ADRs in Kuala Lumpur. For

2011, the ADR of the top-five hotels is expected to register

approximately US$ 135, a slight increase of 3 % over 2010.

The outlook for the islands of Penang and Langkawi are also

bright, with the former island undergoing a renaissance at the

moment. The designation of George Town as a World Heritage

Site in 2008 has provided a boost to the tourism industry.

Amanresorts is building a property on Penang Hill which will

undoubtedly elevate the status of the island as one of Asia’s

primary destinations. The proliferation of small boutique hotels,

restaurants, cafes and galleries housed in restored shop-

houses in the heritage enclave over the last two years have

been drawing foreign visitors to the island, on track to putting

Penang Island on the road to becoming the Pearl of the Orient

again. In 2010, airport passenger movements registered

a phenomenal increase of more than 25 % to 4.2 million,

although the compound annual growth between 2000 and 2010

was only 4.3 %.

Langkawi has the highest ADR in the country and is considered

a high-end destination. However, the projected opening of

the 214-guestroom Four Points by Sheraton in Langkawi in

early 2012 is expected to change the tourist mix. Currently,

the island draws mainly budget and high-end travellers with

very limited accommodation options for tourists in the middle.

Further developments at The Datai Bay to build two high-end

resorts (one of which is a Shangri-La) over the next two years

will further consolidate Langkawi’s position as Malaysia’s main

luxury holiday destination.

Another primary destination in Malaysia that attracts a significant

number of foreign tourists is Kota Kinabalu in Borneo. Despite

the popularity of Borneo with its miles of pristine beaches,

beautiful islands and eco- and adventure tourism, there has

been very little hotel development over the last decade. During

the period 2000 to 2010, tourist arrivals to Sabah saw a

compound annual growth rate of 11.5 %. In 2010, tourist arrivals

to Sabah stood at 2.5 million. The pending openings of the

high-end all-villa resorts on Pulau Tiga and Pulau Gaya by YTL

Hotels in late 2011/early 2012 will further enhance Kota Kinabalu

as a primary holiday destination of Malaysia.

Sen Soon Mun

INdONESIAsituation rEport

Jakarta

The Jakarta hotel market is continuing its upward trend,

especially in ADR, after a long hiatus with rates coming back up

to a more respectable level when compared regionally. Market

occupancy has somewhat stabilized since 2009-10 ; not many

hotels came on line in the past five years. As a result, RevPAR

for Jakarta hotels is probably at its highest level in a long time.

There is an expectation : an influx of mid-tier and limited-service

budget hotels starting operations this year, in particular the

proliferation of home-grown brands such as Pop !, Amaris, Max

One, Whiz, Fave and so on, along with international brands such

as Formule One, Tune, Holiday Inn Express, Days, etc. Data on

these lower segments of the hotel market, however, are not yet

readily available.

Aside from the lower-end segments, several middle and high

end hotels are expected to come on line from the end of 2011,


HOTELyearbook2012

Signs of life


HOTELyearbook2012

including the Raffles at the Ciputra World, the Luxury Collection,

Pullman and St Regis. Accor is also planning several mid-tier

hotels with its Mercure and Novotel btands. Early rumors are

floating around that a W is also coming into Jakarta in the not

so distant future.

Jakarta2009 YTD Dec.

Occ ADR RevPAR

2010 YTD Dec.

Occ ADR RevPAR

2011 YTD aug.

Occ ADR RevPAR

Top Tier 60% $71 $42 66% $86 $56 67% $91 $61

Mid Tier 72% $49 $36 75% $56 $42 71% $62 $44

Combined 64% $63 $40 70% $72 $50 69% $78 $54

Bali

Across the board, the 2010 year-end results for Bali came

out in the middle of last year and were better than originally

anticipated. Although the ADRs are quite flat year-on-year,

coming from a fairly high base anyway, occupancy is showing

a healthy up-trend. Coming out of the effects of the global

financial crisis, the rates have been climbing back up in the

first three quarters of 2011, while occupancy has somewhat

stabilized.

Foreign visitor arrivals into Bali have breached historical records

since 2007 and the trend seems to be continuing. 2010 ended

with about a 7 % increase year-on-year, while 2011 is poised to

end up with about the same increase by year end (slightly above

8 % at end of August).

With strong market performance continuing, hotel development

seems to be in high gear. And this is true for all hotel products

across the board, from limited-service budget hotels like Tune,

Amaris, Pop!, Fave and Max One, to high-end products like

Baccarat, Jumeirah and Ritz-Carlton, and anything in between,

like InterContinental, Anantara, Sofitel, Westin, etc. across

Bali Island. High land prices are perhaps the only factor that is

somewhat putting a brake on the hotel development frenzy in Bali.

Bali2009 YTD Dec.

Occ ADR RevPAR

2010 YTD Dec.

Occ ADR RevPAR

2011 YTD aug.

Occ ADR RevPAR

Upper Luxury

46% $511 $236 52% $494 $256 56% $540 $302

Luxury 65% $238 $156 74% $247 $182 75% $270 $202

Top Tier 69% $133 $92 75% $134 $100 77% $144 $112

Mid Tier 82% $77 $63 82% $77 $63 77% $90 $69

Combined 72% $120 $87 75% $127 $95 75% $140 $104

outlooK for 2012

Although there are worries over the far-reaching effects of the

continuing economic uncertainties in the US and Europe into

the Asian and Southeast Asian markets, Indonesia seems to be

relatively unaffected and continues to be on the path of relatively

strong economic growth – at least for the next few years leading

up to the 2014 election year.

With continued improved accessibility and very active domestic

traffic thanks to low-cost carriers, most hoteliers in Jakarta are

optimistic that the market buoyancy will continue as long as the

new addition to supply can be somewhat controlled.

For Bali, the moratorium on hotel development permits in the

three most densely populated Regencies in South Bali is still in

force and should slow down the addition to new supply, while

the infrastructure deficiencies are being ironed out by the local

government. In the meantime, unaffected Regencies such as

Tabanan on the west coast and Klunkung on the east coast

are poised to become the locations for the next generation of

world-class resorts on this Isle of the Gods.

With strong market performance continuing, hotel development seems to be in high gear

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With the appointment of a new Minister of Tourism in the recent

cabinet reshuffle, most industry practitioners are expecting

some positive changes related to the immediate future of the

tourism and hotel industries in Indonesia.

Rio Kondo

MALdIVESsituation rEport

You arrive at the airport, and within minutes, you are whisked

off to a private island via a speedboat or a low flying seaplane.

You fly over the vast blue Indian Ocean, with a panoramic view

of the numerous small but lush islands that make up this exotic

destination. At the resort, you are greeted by your hosts and

exotic beats on the bodu beru, before being escorted to your

own villa with a plunge pool. You take a deep breath of the

warm, salty, tropical air ; while white, soft sand trickles between

your toes and a rich underwater world awaits a few steps away.

Welcome to the Maldives. To many, the Maldives is the epitome

of luxury travel in the region and was previously reserved

for a select few. With a large variety of resorts these days,

the Maldives is much more accessible than ever before. The

Maldives has witnessed some significant changes in recent

years, such as the appointment of a new President for the first

time in 30 years, the replacement of an age-old bed tax with a

goods and service tax, the entrance of a different mix and profile

of resorts, and shifts in the geographic sources of key markets.

KEy pErformancE indicators, upscalE rEsorts,

maldivEs, 2006-2011 junE ytd

Due to the global financial crisis and a large influx of new

supply, the Maldives suffered a significant blow in 2009 and

2010. Between 2004 and 2008, the upscale segment, for

instance, welcomed an average of about one new resort per

year. Starting in 2009, however, several new resorts opened

2007 2008 20102006 2009 Jun YTD2010

Jun YTD2011

Average Daily Rate (ARD)

Revenue Per Available Room (RevPAR)

Occupancy

0

100

200

300

400

500

600

700

800

0%

10%

20%

30%

40%

50%

60%

70%

80%


Signs of life


HOTELyearbook2012

their doors, such as the Shangri-la Villigili, the Beach House by

Waldorf Astoria, Constance Halaveli and the Alila Villas Hadahaa

(now Park Hyatt). Coupled with an overall drop in tourist arrivals

(with a more significant impact on the upscale segment),

the upscale resorts reported a low occupancy of only 56 %, with

an 18 % year-on-year drop in ADR and a corresponding 32 %

drop in RevPAR. ADR continued to slide in 2010 as demand

numbers continued to drop and the market struggled to absorb

the new supply.

2011 has begun to see several changes in consumer trends.

The biggest change to tourism in the Maldives has been the

drastic switch in the geographic sources of its visitors. The

more prominent nationality sources to the Maldives had typically

been European, namely the United Kingdom, Italy and Germany.

Since 2009, however, these numbers have declined gradually ;

and in 2010, China became the largest geographic source to

top 10 sourcE countriEs, maldivEs, 2008-2011 jun ytd

the Maldives, accounting for 15 % of total international tourist

arrivals. This radical change in a relatively short period of time

has seen resorts scramble to translate resort collaterals, come

up with new food menu items, recruit Chinese-speaking front

line staff and create more guest activities in the resorts. As the

Chinese travel at different times of the year compared to their

European counterparts, hotels in the Maldives are also seeing

less apparent seasonality patterns throughout the year.

2010-2011 has also seen the implementation of two important

Tourism bills :

• Second Amendment to the Maldives Tourism Act. With the

amendment, land lease rent will no longer be computed

based on number of beds, but will be based on the sizes of

the islands. Lease period shall be for a maximum period of 50

years from the date of lease, instead of 25 years previously

(subjected to extension, should initial investment exceed

US$10 million).

• Tourism Goods and Services Tax Bill. According to the new

bill, a tax of 3.5 % is levied onto room rates, all goods and

services sold to tourists, travel planner charges and domestic

transportation. The bed tax will gradually be abolished by the

end of 2013.

In recent years, some of the upscale properties in the Maldives,

such as Centara Grand Island, Lily Beach and Diva have taken

The biggest change to tourism in the Maldives has been the drastic switch in the geographic sources of its visitors. The more prominent nationality sources to the Maldives had typically been European

2008 2009 2010 June YTD2010

June YTD2011

Italy

Switzerland

Germany

India

France

KoreaJapan

UK

Number of visitors ('000s)

Russia

China

0

20

40

60

80

100

120

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on a new strategic direction and positioning, introducing all-

inclusive packages to the destination. This is a relatively new

phenomenon in this exclusive holiday location. Several new

resorts opened their doors in 2011 as well. Familiar brands

already with a presence in the Maldives, such as Constance,

Per Aquum, Six Senses and Anantara, are expanding their

portfolio with subsequent properties. Hyatt International marked

their first foray into the Maldives with the rebranding of the Alila

Villas Hadahaa into a Park Hyatt. Also in Q4 2011, the Maldives

will see the entrance of new brands into the « playground, » such

as Dubai-based Jumeirah and US-based Viceroy.

outlooK for 2012

After an encouraging first half of the year when the market saw a

slight improvement in both occupancy and ADR, hoteliers in general

are positive about full year performance in 2011. However, with such

a significant influx of new supply in the second half of 2011 and in

2012, compounded by fears of another global recession triggered

by economic troubles in the US and the EU, many are nervous that

the market will undergo a slump similar to that of 2009.

China, we feel, will continue to be the largest geographic source

for the Maldives in the short to medium term, as the destination

gains rapid popularity among honeymooners and wealthy

extended families in the Mainland. These Chinese visitors will

continue to gravitate towards resorts which are going the extra

mile to cater to their needs and those with strong word-of-

mouth marketing. Another fast growing market to watch out for

is the Russian market. Unlike the Chinese travelers, they prefer

staying in beach villas and have the propensity to incur ancillary

expenses, such as food, beverages and spa.

Recent years have seen regional brands enter the Maldives,

such as Thai-based Anantara and Centara. In 2012, two other

Thai brands, namely Dusit Thani and Amari, will be entering the

ranks. We will likely see further postponement in the openings

of several properties currently under construction, such as

the JW Marriott Gaakoshibee, the Regent Malefushi and the

Mandarin Oriental Maavelavaaru, as developers seek out

additional financing to complete these projects.

Average occupancy of the market, particularly in the upscale

segment, is expected to be impacted by the new supply ; and

some resorts, especially those which are less established

or aged, will have a harder time staying competitive. Luxury

properties, such as One & Only, Four Seasons, Soneva (Six

Senses) and Huvafen Fushi are, however, expected to be

minimally impacted due to their strong market reputation and no

new competition in the top-luxury segment.

Shyn Yee Ho

UNITEd ARAB EMIRATESsituation rEport

The political and social unrest which started early in the year

2011 has heavily shaken the hotel and tourism markets in the

Middle East and North Africa (MENA). Amid the chaos of the

Arab Spring, which resulted in political upheaval in several

countries, the United Arab Emirates (UAE) has proven to be a

safe oasis in the region.

The UAE has not seen any of the violence that has reverberated

through the MENA region, and as a result, regional as well as

international tourists have diverted their travel plans to their

safer destinations. Particularly the Emirates of Dubai and Abu

Dhabi, which offer a comprehensively developed tourism

infrastructure like high-quality hotels, shopping facilities and

other attractions, have been the focus of travelers.

The hotel market in the UAE has clearly benefited from the Arab

Spring, and it is unlikely that this trend will change until « hot

spot countries » such as Egypt, Tunisia and Syria have regained

some stability.

According to data from STR Global and our own research

at Horwath HTL, current key performance indicators of the

hotel market reflect the positive trend. After the typically lower

demand during the summer months and the Ramadan season,

occupancy in Abu Dhabi rose to 62.4 % in September 2011,

which represents an increase of 8.7 % compared to the same


HOTELyearbook2012

Signs of life


month the previous year. The annual performance in the capital

of the UAE currently stands at 63.3 % occupancy, which is

14.3 % higher than in 2010, along with an average daily rate

(ADR) of US$ 156.99 YTD in September 2011.

The hotel market also experienced an upswing in Dubai, where

the occupancy in September 2011 surged to 71.9 %, which is

an increase of 13.2 percentage points compared to last year’s

performance of 63.3 %.

ADR in Dubai amounts to US$ 207.72 on a YTD basis,

representing an improvement of 11.2 % compared to 2010.

The RevPAR in the Emirate rose to US$ 152.13, which

is a substantial increase of 8 % in relation to the market

performance in 2010.

The sharp decline of the tourism market in the years 2008 –

2010 in the aftermath of the financial crisis also had a drastic

impact on the hotel development pipeline. Following the boom

years, several projects – given the changed economic situation

in the UAE and the restricted availability of development finance

– were cancelled, put on hold or scaled back.

As of September 2011, Dubai has an inventory of approximately

53,000 hotel rooms whereas the Emirate of Abu Dhabi currently

counts around 13,000 quality units. An additional 1,700 rooms

in Dubai and 1,500 keys in Abu Dhabi entered the market.

The major openings were mainly in the 4 to 5-star category in

both destinations. The slowdown of hotel projects positively

contributed to the recovery of the hospitality industry, as the

market could easily absorb the additional supply.

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outlooK for 2012

The uncertainties in Europe with regard to the slowdown of the

economy in the coming year could cast long shadows and pose

a downside risk on arrivals from Europe, which represents one

of the most important feeder markets for international arrivals in

the UAE.

There is still potential to diversify the hotel and tourism offering,

for example by focusing on budget/mid-market hotels or

through special products which appeal to specific travelers,

such as boutique hotels or the all-inclusive hospitality concept.

The UAE has cemented its position as a safe oasis within a

turbulent region and will continue to be one of the preferred

places in MENA for leisure and business.

Hannes Schied

VIETNAMsituation rEport

2011 will be remembered as the year in which Vietnam

experienced the highest inflation rate amongst Asian countries.

In September, the inflation rate reached 22 % year-on-year.

As such, the inflation rate for the year is expected to average

18.7 %, much higher than the 15 % previously forecasted by the

government. Soaring prices hurt business investors in various

ways, such as through increased labor costs and double-digit

interest rates, while increasing overall uncertainty – which

investors don’t like in general.

Despite such turmoil, the hotel sector has managed to stay

positive. According to STR Global, the Vietnam hotel market

witnessed year-on-year RevPAR growth of 3.3 % in September,

comprising a 4.5 % increase in ADR and a 1.1 % decline in

occupancy. Both the Ho Chi Minh City (HCMC) and Hanoi

upper-tier hotel markets have undergone tough times, but the

HCMC market, which historically lagged slightly behind Hanoi

in terms of occupancy and RevPAR, has now begun to

outperform Hanoi.

Besides HCMC and Hanoi, the country has started to develop

major leisure destinations along the coast such as Nha Trang,

Cam Ranh, Da Nang, Hoi An. As a result, a number of new hotel

developments are appearing such as the Sheraton Nha Trang,

Hyatt Regency Danang Resort and Spa, Crowne Plaza Danang

and Novotel Imperial Hoi An.

International arrivals as of YTD September recorded a 15.5 %

year-on-year growth. Regarding the number of arrivals by

market, China registers the largest share at 23 %, followed by

20072006 2008 2009 SEP YTD 2011

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201050

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HOTELyearbook2012

Signs of life


South Korea and Japan at about 9 % and 8 %, respectively.

While the number of leisure travellers increased by 10 %, the

number of business travellers decreased by 5 %. As a result,

mid-tier hotels catering to price-sensitive leisure travelers

performed better than upper-tier hotels focusing more on

corporate guests.

outlooK for 2012

Vietnam’s economic growth rate for 2011 is forecast at 5.8 %,

which is one percentage point lower than 2010. For 2012, the

government is hoping to ease the inflation rate to 11 %. As such,

massive pressure is put on the government and its policies

to stabilize the economy and regain investor confidence in

the country. As a result, corporate business demand growth

is expected to remain sluggish in 2012. However, the leisure

market is expected to continue growing fast, especially from

neighboring countries. September year-on-year figures show

that the number of arrivals from Cambodia and China increased

by approximately 60 % and 45 %, respectively.

With a large influx of supply in 2012 (approximately 75 %

increase in Hanoi, reaching 4,000 rooms, and 38 % increase

in HCMC, reaching 7,000 rooms), hotel owners and operators

will need to prepare for tightened competition, with extreme

downward pressure on rates. However, with labor costs

relatively low and gross operating profits relatively high as a

result, there is room to see through further tough times while

maintaining positive operating profit. In the longer run, the

addition of new internationally managed and branded hotels is

crucial to the future growth of the Vietnamese tourism industry.

Van Phan

PHILIPPINESsituation rEport

After a lackluster performance in 2009, the hotel and tourism

industry in the Philippines ended on a high note in 2010. Despite

the bus hostage taking situation and travel warnings from

countries such as USA, Australia, Hong Kong and England, the

country welcomed a record 3.52 million international visitors,

exceeding the previous high of 3.14 million set in 2008.

According to STR Global, market occupancy surged by 5

percentage points to 67 % in 2010, while countrywide ADR

averaged PHP 4,760, inching up by less than one percent from

2009. Hotels in greater Manila, a key hotel market, registered

better performances, with average occupancy improving by 5

percentage points and ADR growing by 2 %.

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The hotel market’s buoyant performance was driven partly

by improved economic conditions in main visitor source

countries such as Korea and USA. Corporate travel was also

strong, supported by the resurgence in domestic and foreign

investments, following the positively viewed election result

boosting investor confidence. Remittances of Filipino foreign

workers also sustained strong consumption and encouraged

domestic travel.

Outlook for the tourism industry remains favorable in 2011.

Based on YTD August 2011 international tourism arrivals

figures, the industry is in the midst of another strong year. The

country received around 2.60 million visitors during the first

eight months, increasing by almost 12 % from the same period

in 2010. The strong showing is led by the 30 % surge in Korean

visitors. As of YTD August 2011, the Korean market accounted

for the largest share of visitor arrivals at 24 percent.

While the nationwide market occupancy remained at 68 % as of

YTD September 2011, ADR showed an improvement of 5 % in the

same period. Hotel market occupancy in Manila averaged 72 %,

while ADR averaged PHP 5,136, increasing by one percentage

point and 3 %, respectively, from YTD September 2010.

outlooK for 2012

There are some positive developments surrounding the long

delayed PAGCOR Entertainment City, an ambitious integrated

casino project in the Manila Bay consisting of numerous hotels,

casinos and entertainment facilities. Belle Corporation, one of

the four companies authorized to develop hotels and casinos

at the compound listed PHP 4.5 billion worth of shares in 2011

to fund the construction of the company’s Belle Grande Manila

hotel and casino project. Albeit the future of the project is still

uncertain, news such as this has created a buzz, sparking

additional investor interest in the Philippines.

2012 should also be an interesting year in terms of new hotel

supply with the opening of the 330-room Fairmont and Raffles

Hotel in the Makati CBD. The last top-tier hotel built in the

Makati CBD was the Shangri-La back in 1993.

Future growth in the tourism and hotel industry is largely

contingent on the improvement of tourism infrastructure. The

Ninoy Aquino International Airport (NAIA) in Manila, the main

gateway to the country, is already operating at full capacity.

Terminal 3, the newest terminal in NAIA, has faced controversies

over the years and has not been fully operational. President

Aquino has announced plans to utilize Terminal 3 to its

maximum capacity, which may mean moving some international

flights from Terminal 1. However, currently, ANA is the only

foreign based carrier to operate out of Terminal 3. Also, repairs

on the terminal and upgrades to equipment have yet to begin.

The Diosdado Macapagal International Airport (DMIA) located

in the Clark Freeport Zone is reportedly being touted as the

next primary gateway replacing NAIA in the future. Although

the airport capacity issues may only have minimum impact on

tourism in the near term, expansion and solving the problem will

be critical for sustained growth and supporting projects such as

the ambitious PAGCOR entertainment city.

While caution on the industry outlook is warranted due to the

European debt crisis, global economic slowdown and constant

travel warnings to the Philippines, our outlook remains positive

for 2012. Our optimistic view is supported by good economic

forecasts driven by strong remittances and investments

spurring corporate and regional domestic travel amidst minimal

hotel supply growth.

Jerome Siy


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